Assume a monopolist faces two markets for its product and can keep the markets s

Question

Assume a monopolist faces two markets for its product and can keep the markets separable. You are given the following information: The demand curve for market A is PA = 300 -6QA The demand curve for market B is PB = 240 - 3QB MC=60 a) Write down the equations for MRA and MRE. (4 points) b) Find the profit-maximizing output and price for market A (6 points) c) Find the profit-maximizing output and price for market B (6 points) d) Which market has the more elastic demand - Market A or Market B? Why? (4 points)

Explanation / Answer

a.

Pa=300-6Qa

Ra= Pa*Qa = 300Qa-6Qa^2

MRa = dRa/dQa = 300-12Qa

Similarly MRb = 240-6Qb

B.

Two separate market MR=MC

For market A

300-12Qa= 60

Qa =20

C.

For Market B

240-6Qb= 60

Qb=30

D.

Elasticity = dqQ/pdp

For market A

dQ/dP =-1/6

at monopoly point

for Market B

dQ/dP = -1/3

since the slope of for market b is larger market B is more elastic than market A.

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